. .

Textile Industry: A review

5 lakh spindles—600 looms lying closed

Aug 28 - Sep 03, 2000

At least 500,000 spindles and 600 looms either closed or lying idle depriving over the economy of over $500 million in exports. Mohsin Aziz, Chairman All Pakistan Textile Mills Association (APTMA) has claimed that if these closed spindles are revived and the Export Refinance Facility (ERF) is allowed on yarn, textile industry may contribute an additional export worth one billion dollars per annum.

Mohsin Aziz, Chairman, All Pakistan Textile Mills Association (APTMA) while speaking at the annual dinner organized by APTMA Islamabad extended the assurance recently.

Chief Executive General Pervez Musharraf along with his Federal Ministers, Governors from all the four provinces, diplomats, dignitaries and prominent figures from all walks of life attended the dinner.

The Chief Executive while addressing the audience said that the country was facing a 'do or die situation' therefore all the stakeholders in the country should work jointly to achieve the dream of joining the comity of nations with our heads held high. He also said that time for discussion and preparing strategies was over and now it is the time for implementation.

Acknowledging the outstanding contributions made by the textile sector for supporting the economic reform plans launched by the present government, Gen. Pervez Musharraf admitted that on the economic front only the textile sector has bounced back while other sectors of the economy show no sign of improvement. He said these efforts in all other areas of his government showing positive results but unfortunately the economy was very slow in recovery. The Chief Executive appreciated the textile industrialists for their confidence in the National economy depicted by their investment of over $500 million in Balancing, Modernization and Replacement (BMR) in the textile sector and also for increasing exports by over 12 per cent.

Gen. Pervez Musharraf however categorically said that survival of Pakistan lies in its economic revival and for economic revival we need to revive the industry, especially the textile sector. He further said that the government do not want to export raw cotton but the farmer is getting the right price, we will not stop him from exporting, if the textile sector need this cotton, they should pay the price which the farmer is being offered by the international buyers' he observed.

Abdul Razzak Dawood, minister for commerce while speaking on the occasion highlighted the features of the long-term textile policy envisaged in 'Textile Vision-2005'. He announced duty free import of Ring Spinning Frames for the Textile Industry. The minister also assured that adequate financing for BMR of the textile industry and all other facilitating incentives and support would be provided for revival of the textile industry and its exports. The minister also announced the promulgation of the Ordinance for Corporate Industrial Re-structuring Committee, which will shortly undertake revival of Sick and Closed Industrial Units.

In his welcome address, Mohsin Aziz, welcoming the positive support extended by the government to the textile industry highlighted the problems faced by the industry. He said complex and confusing Income Tax and sales tax laws and procedures needed to be urgently revised. He said that present income tax and sales tax laws are draconian and needed to be revised urgently.

He regretted that in spite of the instructions of Minister for Finance and Governor State Bank, the banks are reluctant to extend financing for urgently required BMR of the textile industry. Unless the banks changed their attitude towards the textile industry the investment of Rs333 billion required for increasing the textile exports from existing $5 billion to $14 billion by 2005 will not materialize.

He urged the government to restore refinance on yarn. He assured that if export refinance on yarn is allowed the industry would increase exports by an additional $500 million per annum. Similarly, he proposed revival of 5 lakh spindles and 600 looms that are lying idle closed units. Their revival at a negligible cost will also contribute additional exports of $500 million annually, he assured. Mohsin also urged the Chief Executive to immediately allow gas connections for generators installed by the textile units to overcome the irregular and uncertain supply of electricity.

He regretted that in spite of repeated announcements and pronouncements by the previous governments, large sectors of the textile economy were free from levy of GST. The policy of constant persuasion employed by the present government has borne fruit and these sectors are now gradually coming with the ambit of GST. Once their little irritants are removed they shall be fully integrated into the mainstream of textile industry.

There is also this lingering problem faced by the industry of over due Refunds on Exports. The difficulty is occasioned because of prolonged verification and authentication of refund documents. If starting point of Sales tax is from the Yarn stage instead of Cotton, many irritants will be removed. For Sales tax on other value added export items, a system can be evolved whereby adjustments will be made instead of refund. This will relieve us of unnecessary and unproductive activities, thereby making everyone contended including the government.

Mohsin also pointed out that because of the 'On and Off' supply of electricity and its high cost, many textile mills have imported generators run by gas. He urged the government that gas connections for the generators in the textile units are allowed. He also pointed an anomaly that sales tax adjustment is presently allowed on all machinery but ironically it is denied on generators. He demanded of the government that sales tax adjustment be also allowed on generators.

He said that a very important decision was taken by the Economic Advisory Board about reducing the number of levies on the industry. This decision has not been implemented so far. An early action in this regard will go a long way to clear many cobwebs, he said.

He said that Industry as well as the government both agree on increasing the production and exports of textile from Pakistan. However there are more than 500,000 spindles and 600 shuttle-less looms lying idle as closed units. Their revival will no doubt contribute additional exports of $500 million per annum.

Mohsin observed that Pakistan's economic and social destiny is in our own hands. There is no such thing as and with no strings attached. If we do not keep our house in order and carry on borrowing in order to survive, then there is no option for us but to accept the dictate of the lenders, no matter how disgraceful it may be. Pakistan has the opportunity and the capacity to achieve in the next ten years, what we have failed to achieve in the last 53 years. Towards that end there has to be readiness and willingness to accept the challenge like true soldiers of Islam. 'We cannot wait for a dead man's shoes because if we do, we may long enough go barefoot'.

Earlier in a meeting held at Lahore, APTMA Chief expressed his appreciation over the governmentís decision to restore the refinancing facility on Export Bleached and Unbleached (Grey) Fabrics. The decision will go a long way and help in increasing exports.

The government has taken this decision with less than a month on the recommendations made by APTMA. The decision is aimed at reviving the stagnant export sector and extend its helping hand to the textile industry grant of refinance facility on 10 per cent mark up on export of Bleached and Unbleached Grey fabrics and thereby paved the way for the over due break through. An audible sigh of relief resounded among the weaving segment of textile sector and the weaving sector has now to cheer over the inclusion of fabrics under concessionary refinance facility.

Now it should be possible for the exporters of fabrics to sell at competitive rates in the world market and the objective of the government to boost export will not be defeated. It seems necessary to reiterate once again that these measures are being taken by the government with a view to help the textile industry tide over its present difficulties and to restore its viability and competitive ability.

The textile industry has to be thankful that it has not been treated as 'Children of Lesser God'. It is another matter that it has not been treated with due warmth and affection as was merited. But then the industry has learnt to live and thrive while being treated as one who deserves a sweet along with a kick.

APTMA however has urged the government to grant of similarly concession to spinning sector as well, the fact of the matter is that spinning segment has become an eye-sore for some people in authority and a deliberate policy being adopted to cripple it. The present government acknowledges this fact that perpetuates the misery or nullifies its own efforts of revival of the vital segment of textile chain.

The pivotal role that export play in a developing country like Pakistan is a well recognized fact that needs no overemphasis. The textile sector in general and spinning sector in particular has always been looked as of paramount national importance especially for mobilizing foreign exchange resources to meet the growing needs of development activities and to refine the balance of payment position. The overall export performance crucially depends mainly on the export behavior of cotton yarn and cotton fabrics.

Value addition no doubt is the requirement of the day. There can be substantial value addition in yarn and fabrics but for that a comprehensive expansion programme is needed. There are still miles to go before industry rises and shines as has been envisaged to move into production and export of finer counts and other value added yarn. Government should design its incentives system in a manner that should promote value addition and not to revoke the favourable arrangements. Export Refinance Facility on all kind of yarn is immediately restored. A target of $8 billion is set for the textile sector the year 2000-2001. Export of value added product could be increased to a certain extent. Yarn to the extent of 90 per cent is being exported to non-quota countries, which means unlimited market excess. The potential as well as exportable surplus in the form of cotton yarn and blended yarn exists. Provided favourable facilities such as export refinance at the reduced mark-up rate is offered to compete in the global market sooner Pakistan realize, better the results will be achieved. More we delay, others will fill the gap. If the need of growth of this sector is acceptable in the textile vision 2005, the suitable policies and measures are vital to provide the necessary stimuli for growth and development. Otherwise other alternative is stagnation and ultimate death of the great sector with such glorious and vast potential. Pakistan is a major world exporter of yarn and supplies about 30 per cent of the world market. What better proof can there be of the excellent quality and competitiveness of Pakistan textile industry? , Mohsin questioned.